The following papers numbered 1 to 10 read on this motion by defendant New York Community Bank (Bank) pursuant to CPLR 3211(a)(1), (7) and (10) and Real Property Law § 266 to dismiss the complaint asserted against it.

Papers

Numbered

Notice of Motion - Affidavits - Exhibits .............................................1-6

Answering Affidavits - Exhibits ..........................................................7-10

Upon the foregoing papers it is ordered that the motion is determined as follows:

Woodhaven Associates LLC (Woodhaven) is the owner of the real property known as 93-22 Jamaica Avenue, Woodhaven, New York. Plaintiff Stephen Fine, an alleged member of Woodhaven, commenced this derivative action on behalf of the limited liability company, claiming that Ari Chitrik a/k/a Aaron Chitrik, the purported manager of Woodhaven, executed and delivered a mortgage and related guaranty to defendant Bank on behalf of Woodhaven, without authority to do so. Plaintiff Fine also alleges that defendant Bank was aware of Chitrik's [*2]lack of authority to encumber Woodhaven's property and execute the guaranty on behalf of Woodhaven, but wilfully and maliciously disregarded such lack of authority when entering into the mortgage transaction, to the detriment of Woodhaven's members. In the complaint, plaintiff Fine asserts three causes of action, and seeks a judgment declaring the mortgage and guaranty are void and of no force and effect against the property or Woodhaven, permanently enjoining the enforcement of the mortgage and guaranty, and awarding damages, including attorneys' fees.

In lieu of serving an answer, defendant Bank moves to dismiss the complaint. It asserts that plaintiff Fine has not pleaded, with requisite particularity, his demand on the limited liability company to initiate a lawsuit, and therefore, has failed to state a derivative cause of action. Defendant Bank also asserts that documentary evidence exists which belies plaintiff Fine's claim that Chitrik lacked the requisite authority to execute and deliver the mortgage and guaranty on behalf of Woodhaven, and plaintiff Fine has failed to join Chitrik as a necessary party defendant. Defendant Bank also asserts that it is a bona fide encumbrancer for value without notice of any purported wrongdoing and is protected against plaintiff's claims, and in its interests, by virtue of the recording statute.

That branch of the motion to dismiss based upon failure to join Chitrik as a necessary party defendant is denied (CPLR 3211[a][10]). Complete relief may be accorded between the present parties in the absence of Chitrik, and Chitrik will not be inequitably affected by a judgment in this derivative action (CPLR 1001[a]; see Amev Capital Corp. v Kirk, 172 AD2d 714 [1991]).

With respect to that branch of the motion to dismiss pursuant to CPLR 3211(a)(7), a member of a limited liability company may bring a derivative suit on behalf of the company notwithstanding no provision authorizing such a suit exists in the Limited Liability Company Law (see Tzolis v Wolff, 10 NY3d 100 [2008]). The Court of Appeals, in reaching the holding in Tzolis, did not rule on whether a member's right to sue derivatively is limited in any way, but instead indicated it was a question for another day (id. at 109). The Court of Appeals noted, however, that prior to the enactment of Business Corporation Law § 626(c), which requires the complaint in a derivative suit to allege "the efforts of the plaintiff to secure the initiation of such action ... or the reasons for not making such effort," a plaintiff was required to present a "sufficient excuse," for originating a derivative suit, i.e., a showing that those in control of the corporation "refused to prosecute" because they were themselves the wrongdoers, or were in "collusion with" them, citing Robinson v Smith (3 Paige Ch 222 [1832]) (see also Continental Sec. Co. v Belmont, 206 NY 7 [1912]).^[FN1] [*3]

Since Tzolis, other courts have determined that a pre-suit demand is required in a derivative action involving a limited liability company unless to make one would be futile, and the plaintiff must allege such demand or futility with sufficient particularity in the complaint (see Segal v Cooper, 49 AD3d 467 [1st Dept 2008];Baker v Andover Associates Management Corp., 30 Misc 3d 1218[A] [2009]; Evans v Perl, 19 Misc 3d 1119[A] [2008]). Such demand requirement may be considered a necessary limitation on the right of a member of a limited liability company to bring a derivative suit for the same reason it is imposed on shareholders in relation to derivative actions against corporations. Derivative actions brought by shareholders are not favored because they ask courts to intrude unduly into matters of "corporate" governance. The demand requirement insures that person or persons entrusted with the management of a corporation have an opportunity to address the alleged abuses without resort to the courts (see generally Bansbach v Zinn, 1 NY3d 1, 8-9 [2003]). However, because a limited liability company may be a "member-managed LLC,"^[FN2] or a "manager-managed LLC" (see generally Limited Liability Company Law §§ 401, 412[a]), a plaintiff in a derivative action must identify to whom the demand was made, so that the court may determine whether the person or persons entrusted with the management of the limited liability company have been given the opportunity to address the alleged abuses without resort to the courts (see generally Bansbach v Zinn, 1 NY3d 1, 8-9 [2003]), and avoid second-guessing the business judgment of the individuals charged with managing the company.

In this instance, the complaint merely alleges that plaintiff Fine demanded that "Woodhaven" initiate an action against defendant Bank and Chitrik for cancellation and rescission of the mortgage and related guaranty, but "Woodhaven" has refused his demand. Such allegation is not sufficiently particular because the complaint fails to allege to whom in Woodhaven plaintiff Fine made his demand, and therefore, the court cannot determine whether the person, or persons, charged with managing Woodhaven have had the opportunity to act in relation to plaintiff's claims.

Thus, the complaint fails to state a cause of action (CPLR 3211[a][7]). In addition, plaintiff Fine does not identify to whom he addressed the demand in his affidavit in opposition, and makes no request for leave to replead. Accordingly, that branch of the motion by defendant Bank to dismiss the complaint is granted (see Silver v Chase Manhattan Bank, 44 AD2d 797 [1974]; see also Segal v Powers, 180 Misc 2d 57 [1999]). [*4]

Dated: September 6, 2011

J.S.C.